The Chinese authorities were battling to prop up the country’s stock markets on Tuesday after a surprise cash injection from the central bank failed to calm jitters among investors.

Opinion is divided on state of Chinese economy, but not on its importance

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The unexpected 130 billion yuan ($19.94 billion) injection by the central bank – the largest such move to encourage more borrowing since September – came after a 7% crash on Monday triggered a “circuit-breaker” mechanism to suspend trading for the day.

The measures initially helped Chinese mainland indexes recover quickly from a steep initial fall but the selling gained the upper hand in the afternoon. The Shanghai Composite index briefly dipped to 2.7% in the red before it lurched back up again to 0.44% down at 7am GMT.

Elsewhere in Asia Pacific, Japanese stocks fell for a second day in choppy trade to their lowest point since October. In Australia the benchmark ASX/S&P200 closed down 1.6% as the outlook for China continued to drag on the country’s resource-heavy market.

However, markets in Europe and the US were expected to open higher on Tuesday, according to futures trading.

Beijing’s intervention on Tuesday appeared timed to reassure Chinese retail investors, who are always sensitive to liquidity signals, that the bank would support the market with cash.

The People’s Bank of China offered the liquidity in the form of what are known as seven-day reverse repos at an interest rate of 2.25%, according to the statement.

China’s securities regulator said it was studying rules to regulate share sales by major shareholders and senior executives in listed companies.

This would address concerns that the end of a six-month lockup on share sales by major institutional investors timed for this Friday – and scheduled to free up an estimated 1.2 trillion yuan worth of shares for sale next Monday – would result in a massive institutional evacuation from stocks.

The PBOC also published nine new financial service standards that will come into effect on 1 June, to protect consumers.

While some analysts criticised the design of the circuit breaker, saying it inadvertently encouraged bearish sentiment, the regulator said the mechanism had helped calm markets and protect investors – although it said the mechanism needed to be further improved.

Analysts and investors warned that the success of the interventions was not assured. Repeated and often heavy handed interventions by Beijing have kept stock valuations at what many consider excessively high given the slowing economy and falling corporate profits.

“We’ve been waiting for a market drop like this for a long time,” said Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management.

“The economy is poor, stock valuation is still high, and the yuan keeps sliding. The market drop is overdue.”

In a fresh sign that the Chinese economy has weakened, business magazine Caixin reported on Tuesday that China’s national rail freight volumes declined by a tenth in 2015, their biggest ever annual decline.